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Essay / Research Paper Abstract
A 4 page paper discussing banks' contributions to the fallout of the subprime mortgage market that by late 2007 also has affected banks outside of the US. Most banks cannot directly participate in the subprime market, but they indirectly take part in it through their trading in and holding of the Collateralized Debt Obligation (CDO) instruments that comprise much of the foundation of the asset-based securities that provide subprime funding. Bibliography lists 7 sources.
Page Count:
4 pages (~225 words per page)
File: CC6_KSfinBnkMort.rtf
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Unformatted sample text from the term paper:
early 2002, the Federal Deposit Insurance Corporation (FDIC) reported that the concept of the subprime mortgage begun in the 1990s was facing its first real test in the face of
the post-9/11 recession (Subprime Mortgage Lending Faces the Test of a Slowing Economy, 2002). It seemed to be holding well enough, though there were worries about its sustainability.
That was before the astronomical appreciation of home values in many areas of the country, however. The FDIC also was concerned even then with rising delinquency and foreclosure rates.
Bank planners and forecasters certainly had the same information in 2002. Most banks extending mortgages, either directly or through their own mortgage
companies, generally have viewed mortgage lending as carrying relatively little risk. Foreclosure can be costly, but the loan is for an asset that the bank can reclaim in the
case of default. Banks began reaching too far into the field of risky borrowers, however, with an ultimate cost extending far beyond the routine foreclosure. The Mortgage Industry
The mortgage industry was worth $3.1 trillion in 2005; 2.5 trillion in 2006 and is expected to slow to $2.3 trillion in 2007 (Is
it over yet?, 2007). Angelo Mozilo, chairman and CEO of Countrywide Financial Corp., called the events and conditions that have led to the current situation in the mortgage industry,
and now states that he "expects 2007 to be a transitional year for the mortgage industry" (Is it over yet?, 2007; p. 13). Countrywide is one of the nations
largest mortgage lenders and operates in one of the most active segments of the industry. In 2006 Mozilo predicted decline in industry revenues,
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